Insurance; Whether Deaths and Injuries Resulting From a Nursing Home Fire
Constitute One "Medical Incident" Under Insurance Policy; Whether
Court Correctly Determined Total Amount of Available Coverage. A fire, allegedly started by a patient at
the Greenwood Health Center (Greenwood), caused the deaths of a number of patients
and resulted in serious injuries to others. At the time of the fire, Greenwood and six other nursing homes were insured by a professional liability policy
issued by Lexington Insurance Company (Lexington). The declarations section
provided that the limit for "Each Medical Incident" was $500,000 and
that the "Aggregate Limit" was $1,000,000. Further, section IV.B of
the policy provided that "[t]he Aggregate Limit is the most we will pay
for the sum of all damages under this Coverage Part." After the estates
and conservators of thirteen of the fire victims (underlying plaintiffs) filed negligence
suits, Lexington brought this declaratory judgment action to resolve questions
pertaining to the amount of coverage available under the policy. Lexington moved for summary judgment, and the underlying plaintiffs and the property owner
filed cross motions for summary judgment. Lexington contended that under the policy's
"continuous exposure" clause (CE clause), which provided that claims
arising from "continuous, related, or repeated medical incidents shall be
treated as arising out of one medical incident," the underlying
plaintiffs' claims were "related" and constituted a single "medical
incident." The court, however, determined that the CE clause was ambiguous
because "related" could be interpreted to mean either related services
delivered to a number of patients or related services delivered to a particular
patient. Utilizing the doctrine of contra proferentem, which dictates that
ambiguous language will be construed against the party that selected the
language, the court adopted the latter interpretation and concluded that the CE
clause did not combine the negligence claims of different underlying plaintiffs.
Accordingly, it ruled that there were thirteen separate "medical
incidents" under the policy. Next, Lexington argued that the claims of
the underlying plaintiffs were subject to the aggregate limit which, under the
policy's declarations section, was $1 million. It maintained that the $10
million aggregate limit provided in an endorsement, which amended the policy, was
meant to be a cap for all seven facilities covered under the policy rather than
the aggregate limit for each facility. Noting that section II.A of the endorsement
states that the declaration aggregate amount in section IV.B "is deleted in
its entirety and replaced" by the endorsement indicating that the aggregate
limit is $10 million for each facility, the court concluded that the aggregate
limit for Greenwood is unambiguously $10 million. In these appeals, the
Supreme Court will review the trial court's judgment.